In his initial ruling from the bench after hearing oral arguments, Marin County (Calif.) Superior Court Judge Vernon Smith dismissed Gradient Analytics Inc.'s bid to dismiss a libel and unfair-business-practices suit brought by the Internet closeout retailer.
Jonathan Johnson, senior vice president for legal affairs for Salt Lake-based Overstock, said the decision - to be formalized in writing Tuesday - is "very positive."
"We're now able to go forward with [evidence] discovery with a nice stamp of approval from the judge," he said.
However, Scottsdale, Ariz.-based Gradient refused to acknowledge the ruling - though filed into the record Wednesday by the court's reporter and clerk - until Smith files it in writing Tuesday.
"In any event, Gradient Analytics will continue to fight Overstock.com's malicious allegations and its nonstop campaign to intimidate and harass analysts and journalists who have chosen to express informed opinions and facts about a publicly traded company," said spokeswoman Karen Hinton.
Earlier on Wednesday, in a move Overstock officials dismissed as a smokescreen, Gradient released a five-page statement underscoring its oft-repeated denials of charges that it colluded with the Rocker Partners hedge fund to put out negative reports on Overstock.
Gradient also repeated its past claims that Overstock CEO Patrick Byrne had made "numerous malicious, libelous and slanderous" claims about the market research firm. Finally, Gradient's statement included a reprint of a recent Wall Street Journal "Long $ Short" column challenging Overstock's claims that short-sellers such as Rocker had triggered a share price slide from a high of $77.18 in January 2005; on Wednesday, Overstock's shares closed at $22.80, up 30 cents.
Overstock contends that Rocker specializes in short selling - an investment strategy where stock is borrowed and sold, with sellers betting they can buy back the stock and bank the difference when share prices fall.
Johnson's response to Gradient's latest broadside?
"Give me a break. This is a company that would print research reports on a week-by-week basis that it coordinated with a whole cadre of journalists to write negative and false stuff on us. Now that we are finally having a voice in court, they are claiming intimidation?"
Gradient had argued that California's SLAPP, or the Strategic Lawsuit Against Public Participation law, applied because Overstock's intention in filing its suit was to suppress Gradient's criticism of the Utah company.
Smith rejected that argument. The judge also refused to dismiss affidavits from three former Gradient employees - which the research firm claims it fired for cause - that support Overstock's allegations.
Still, Gradient's Hinton maintained that the proceedings Wednesday had not proved "that our research is anything but independent and objective-as well as accurate."
"Overstock.com has, however, proved its ability to intimidate both journalists and research analysts through costly litigation, threats and verbal harassment."
Two columnists for Dow Jones online publications, Herb Greenberg of MarketWatch and Carol Remond of Dow Jones Newswires, recently received subpoenas in a Securities and Exchange Commission investigation related to Overstock.
It was revealed Tuesday that a second financial news organization, the Web site TheStreet.com and its co-founder and major shareholder, James Cramer, were served subpoenas by the SEC about two weeks ago in connection with an inquiry into allegations of stock manipulation.
SEC Chairman Christopher Cox took the unusual step Monday of halting the agency's pursuit of the subpoenas until its five commissioners consider the matter, possibly today.
bmims@sltrib.com
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The Associated Press contributed to this story.
